Category: Stock Market

The Computershare Limited (ASX: CPU) share price has dropped by 1.5% in early morning trade following the release of the company’s full year financial results.

Total revenue and EBITDA decline in FY 2020

Computershare reported total revenue for FY 2020 of $2.3 billion. This was slight decline on 1.9% on the prior year. Full year earnings before interest, taxes, depreciation and amortisation (EBITDA) declined by 3.7% to $650 million, while EBIT declined by 15.2% to $500.2 million. Margin income for Computershare was impacted by significant headwinds during the 12 month period, falling by 18.3% to $201 million.

Computershare revealed that it had been operating ahead of its internal forecasts during the financial year up until March. However, since then, revenues in its market-facing and event divisions had been impact by lower activity levels. In particular, falling interest rates had negatively impacted Computershare’s margin income.

A final dividend of 23 cents per share was declared by Computershare, as had been anticipated. This took the company’s full year dividend distribution to 46 cents per share.

Growth is anticipated to pick up in early FY 2021

On a positive note, Computershare commented that it had seen improved performance during May and June. The company is hopeful that it will see further operating profit growth during the initial part of the current financial year.

Computershare forecasts that EBIT (excluding margin income) for FY 2021 to be up around 10%. However, management earnings per share (EPS) is anticipated to decline by around 11%.

Stuart Irving, CEO said, “I am pleased to report that our operating business has proven its resilience, continuing to perform during the last few months of the financial year despite the deepening impact of COVID-19 and the associated volatility it’s brought to our markets.”

Strong balance sheet fuelling expansion strategy

Pleasingly, Computershare has been able to maintain a strong balance sheet. $506 million of free cash flow was generated during FY 2020. The company has been using some of this cash to fuel its expansion strategy. This includes its investment in US mortgages services business that will provide the company with a base for additional scale in the years to come. In addition, Computershare completed the acquisition of Corporate Creations. It also completed the necessary diligence for its acquisition of Verbatim Global Compliance.

Net debt remains unchanged

Net debt at the end of the financial year remain unchanged on FY 2019. Computershare’s leverage ratio ended up below the midpoint of its target range at 1.93x. Computershare also successfully refinanced its US$500 million debt facility and extended the debt’s duration to 2024.

How has the Computershare share price performed lately?

The Computershare share price has lost ground over the last 12 months, particularly during the early phase of the pandemic. It fell from $15.05 a year ago to now be trading at $13.46.

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Motley Fool contributor Phil Harpur has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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If you’re just starting out with investing, you may not have tens of thousands of dollars to invest into the share market.

But I wouldn’t let that put you off starting your investment journey. This is because even small investments can grow into something meaningful over a long enough timeframe thanks to compounding.

Even if you can only afford to invest $500 into the share market every quarter, it has the potential to grow into something material in the future.

For example, if you invested $500 in the share market each quarter ($2,000 per year) and earned a 10% return annually, your investments would be worth over $360,000 after 30 years.

And if you’re able to increase your investments as the years go by, you could grow your wealth even more.

But which shares should you start with? I believe thinking long term would be the best thing to do and the three shares listed below could be great options. Here’s why I would invest $500 into them:

Megaport Ltd (ASX: MP1)

The first share to consider investing $500 into is Megaport. It is an elasticity connectivity and network services company. Megaport’s service allows businesses to increase and decrease their available bandwidth in response to their own demand requirements. This has proven very popular with businesses that don’t want to be tied to a fixed service level on long-term and expensive contracts. Demand for its service has been growing very strongly, leading to stellar recurring revenue growth. Given the accelerating shift to the cloud, I believe it is well-placed to continue its positive form for the foreseeable future.

Nearmap Ltd (ASX: NEA)

Another top ASX share to consider investing $500 into is Nearmap. It is one of the leading aerial imagery technology and location data companies. At present the company has operations in the ANZ and North American markets and is generating sizeable recurring revenues from both regions. Looking ahead, I remain very confident in its long term growth prospects. This is due to its high quality offering and its strong position in a fragmented market worth an estimated $2.9 billion per year.

Pushpay Holdings Group Ltd (ASX: PPH)

A final option for the $500 investment is Pushpay. It is a fast-growing donor management platform provider in the faith and not-for-profit sectors. While this is a niche market, it is a very lucrative one. In FY 2020 the company delivered a 39% increase in total processing volume to US$5 billion and a 33% increase in operating revenue to US$127.5 million. Pleasingly, this strong growth is expected to continue in FY 2021, with management forecasting its operating earnings to double.

More reading

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends MEGAPORT FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Nearmap Ltd. and PUSHPAY FPO NZX. The Motley Fool Australia has recommended MEGAPORT FPO, Nearmap Ltd., and PUSHPAY FPO NZX. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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What a ride it has been for Afterpay Ltd (ASX: APT) shareholders in 2020, with the Afterpay share price plummeting to lows of $8.01 in March, then rebounding to $70.18 per share at yesterday’s close. That’s an increase of almost 900% – an extremely hefty gain.

The buy now, pay later (BNPL) industry has exploded in recent memory, with fellow rivals Zip Co Ltd (ASX: Z1P) and Openpay Group Ltd (ASX: OPY) all sitting on large gains for the year.

However, the real question on everyone’s mind is can the Afterpay share price go higher?

Is Afterpay’s pathway to profitability near?

The company released its latest result to the market in June, reporting massive increases in FY20, with underlying sales up 112% to $11.1 billion and active customers jumping 116% to 9.9 million.

With the Afterpay strategy focused on global expansion to new markets like Canada, profitability for the company still looks some time off. Expenditure on marketing in the US and UK has deepened its losses momentarily, as it seeks to capture the addressable online opportunity valued at $30 billion.

In addition, capital raising has been used to help fund its accelerated growth, with Afterpay looking to achieve underlying sales of $20 billion by mid-next year. Assuming that target is reached and costs can be contained, net sales will be around $400 million, thus leaving about $180 million net profit.

Of course, anything could change given the current climate. However, it’s hard to argue that the company has not been gaining enough traction to one day rival Visa Inc. (NYSE: V).

Is the BNPL industry in a bubble?

Since March this year, there has been a lot of FOMO activity surrounding the Afterpay share price and its peers. Almost all of the leading BNPL providers have seen their valuations skyrocket to astronomical amounts, which eventually must be justified to the market. There’s no doubt that Afterpay is a growth engine, but how much of its rapid performance does it have left in the tank? Only time will tell.

History has shown investors can get caught up in the hype and put their life savings on promising stocks. You only have to look as far as the DotCom bubble in the late 1990s, and more recently the Bitcoin bubble to see an investor’s hard-earned cash being burned away.

Still, the question remains whether we are currently in a BNPL tech bubble – and I believe we are.

The idea of a young demographic market adopting the ‘new cool way to pay for products’ coupled with Afterpay’s ambitious targets are large factors driving the company’s lofty valuations. However, young people tend to move onto new things quickly and in my opinion, there will be a limit to Afterpay’s future success. New forms of digital payment have accelerated the past few years, and it’s only a matter of time before consumer behaviour embraces something else that’s new and exciting.

Foolish takeaway

While Afterpay is expected to report its full year results on 27 August 2020, I think that the share price is too risky to buy at this stage. Spending habits could change once Jobkeeper and Jobseeker payments subside. With high unemployment levels and an uncertain future for many businesses, one slight stumble could see investors flee the BNPL company.

I will be steering clear for now, until I can see a meaningful drop in the Afterpay share price.

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Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Visa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Tesla Inc (NASDAQ: TSLA) after markets closed Tuesday announced a planned five-for-one stock split, a move that could make the stock more attractive to price-sensitive investors.

Shares of Tesla have had an incredible run in 2020, up 229% year to date. The stock closed Tuesday at $1,374.39 apiece, well above its $211 52-week low. Although stock investing 101 teaches to ignore share price and instead rely on valuation metrics, some investors anchor in on share prices, tending to shy away from high numbers.

A stock split reduces the price of a stock without changing the value of the investment. In Tesla’s case, the company intends for holders as of August 21 to receive four additional shares for every one they own. At Tuesday’s closing price, each of those five shares (four additional + the original share held) would be worth about $274.88, for total consideration matching the current share price.

While the value of an investment in Tesla shouldn’t change due to the split, the lower price could attract new investors to the stock.

Shares of Tesla traded up 7% in after-hours trading, adding more than $15 billion to the company’s market capitalisation despite no change to the automaker’s fundamentals. For context, the market cap of fellow automaker Fiat Chrysler Automobiles (NYSE: FCAU) is currently $23 billion.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The Transurban Group (ASX: TCL) share price will be on close watch this morning following the release of the company’s full year financial results.

Full year earnings decline driven by fall in traffic volumes

As had been widely anticipated by the market, Transurban’s full year financial performance was significantly impacted by the coronavirus pandemic.

Transurban saw its proportional earnings before interest, tax, depreciation and amortisation (EBITDA) and before significant items fall by 6.4% to $1,888 million for the full year. Overall, Transurban recorded a statutory loss amounting to $153 million. Proportional toll revenue saw a more modest fall of 3.4% to $2,492 million during FY 2020.

The fall in revenue and earnings for Transurban was driven by a decline in average daily traffic (ADT) throughout the 12 month period. ADT fell 8.6% across all its operations.

In Sydney, proportional toll revenue increased by 2.8%, while it fell by 8.1% in Melbourne. Proportional toll revenue fell sharply by 13.9% in North America, due to harsher lockdown restrictions over there.

The second half of the financial year had seen operating conditions deteriorate, both locally and overseas for the toll road operator. However, Transurban did point out that a gradual improvement was recently evident across all its locations apart from Melbourne, due to tougher recent restrictions.

Long-term expansion strategy remains on track

Transurban remains confident about its long-term future expansion strategy. The toll road operator recently completed three major toll road projects. These include the New M4 tunnels, Logan Enhancement Project and 395 Express Lanes. A further eight major projects are now in the pipeline.

Chief Executive Officer, Scott Charlton, commented:

“Long-term and proactive management of our balance sheet and organisational capability means we are able to pursue the significant pipeline of opportunities in our existing markets. As always, this will be balanced alongside maintaining our strong investment-grade credit metrics and distributions for security holders.”

Final dividend announced

Transurban announced a final dividend distribution of 16 cents per share to be paid on 14 August 2020 for H2 FY 2020. This takes Transurban’s full year dividend distribution for FY 2020 to 47 cents per share, with 2 cents of this to be fully franked.

How has the Transurban share price performed recently?

The Transurban share price took a significant hit in the early phase of the coronavirus pandemic from February to mid-March. It fell from $16.33 on 11 February to $10.50 on 20 March. That was a decline of 36%. Since that time, it has recovered just over half of those losses and is currently trading at $13.93.

More reading

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Motley Fool contributor Phil Harpur has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Transurban Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Xero Limited (ASX: XRO) as a top ASX growth share is hardly a secret. In fact, the Xero share price has jumped 13.3% higher this year and is up 534.9% in the last 5 years.

Some investors might be wary of Aussie tech shares in the current climate. However, here’s why I think Xero could be a ‘futureproof’ buy.

What does Xero do?

Xero is a New Zealand-based tech company that specialises in accounting software.

It is part of the ‘WAAAX’ group of ASX tech shares alongside the likes of Afterpay Ltd (ASX: APT) and Altium Limited (ASX: ALU).

Xero has steadily grown its business with a number of high-profile small and medium enterprise (SME) clients.

That has catapulted the Xero share price higher and made it one of the top ASX growth shares in recent years.

Why I think the Xero share price could be futureproof

It’s worth noting that I’m not alone in considering Xero a long-term buy.

The Kiwi tech group’s shares currently trade at a price-to-earnings (P/E) ratio of 4,194.5. That means there is a lot of expectation for future growth.

But I think Xero can live up to that expectation. In the short-term, I think the simplicity of Xero’s platform could be a good thing for client retention and acquisition.

The coronavirus pandemic has created headaches for many businesses accounting for the JobKeeper stimulus and other measures.

I think we’ll see demand for Xero products remain high despite some looming headwinds.

With the short-term outlook appearing OK, I’d turn my attention to the future.

I think the Xero share price reflects the fact that there is still huge growth potential.

This could be in the form of an expanded product offering for larger clients or in untapped offshore markets.

The obvious risk is from the competition side of the equation. However, Xero has successfully grown in the past decade and a half despite competition from the KKR-owned MYOB.

Is Xero in the buy zone?

The lofty valuation is a potential red flag for some investors. I think it’s quite clear that Xero is not one for those hunting value.

However, I think Xero has a good product and a strong growth trajectory.

I have no doubt there will be speed bumps along the way. But the strong growth profile protects against long-term value declines.

I’d expect the Kiwi group to continue to innovate in the space and capture additional market share.

Add to that the fact that there’s a large addressable market on offer if Xero can execute its strategy and it seems like a reasonable growth story.

That to me says that the Xero share price could be a futureproof buy as part of a wider diversified portfolio.

More reading

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Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia owns shares of AFTERPAY T FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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A number of Kiwi companies are providing an update this morning as New Zealand tightens its coronavirus restrictions. The SKYCITY Entertainment Group Limited (ASX: SKC) share price is down 5.16% at the time of writing  after the gaming group provided an update on the operational impacts.

What did SkyCity announce?

SkyCity advised that its Auckland casino and entertainment facilities would be closed.

This comes as the New Zealand Government reinstates COVID-19 restrictions after four new cases popped up in Auckland. The government said late on Tuesday night that the new cases were likely to be from community transmission.

SkyCity’s Auckland hotels will remain open to accommodate existing guests currently staying in-house, pending further advice.

The SkyCity share price could be one to watch in early trade as investors react to the news.

Notably, SkyCity’s Adelaide Casino is unaffected by the latest targeted restrictions and remains open.

What does this mean for the SkyCity share price?

Further lockdowns can’t be good news for the SkyCity share price. While New Zealand managed 102 days without any known COVID-19 cases, that streak has now come to an end.

Shares in the Kiwi entertainment group are down 35.7% in 2020 largely thanks to the March bear market.

The big question for investors is just how long the latest restrictions will last. If New Zealand can quickly contain the outbreak, the earnings impact of the Auckland casino shutdown may be minimal.

What about other ASX entertainment shares?

It’s worth keeping an eye on some of SkyCity’s ASX peers this morning.

I think the Star Entertainment Group Ltd (ASX: SGR) share price could be one to watch.

Star Entertainment shares have fallen 41.0% this year as investors fear a long period of reduced foot traffic. That’s partly due to coronavirus capacity restrictions and also immigration restrictions preventing VIP visits.

Both the Star and SkyCity share prices are significantly underperforming the S&P/ASX 200 Index (ASX: XJO) which is down 8.2% in 2020.

More reading

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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Sky City Entertainment Group Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Shares in Aussie media group News Corporation (ASX: NWS) are worth watching today after the company filed its latest regulatory filing. The News Corp share price could be on the move after the company announced a 919% fall in net income to a total US$1,269 million loss.

What did News Corp report?

The huge drop in profit is largely due to impairment charges against the company’s Foxtel and North America Marketing segments.

It’s also worth noting that last week’s fourth-quarter earnings announcement provided a fair bit of detail to investors.

The media group reported that loss on weaker FY20 revenues which fell 11% to US$9,008 million. News Corp did not announce a final dividend, leaving the total dividend for Class B Common Stock at US 20 cents per share from the interim payment.

Net tangible asset backing per share totalled US$4.37 in FY20 which is down 6.6% from last year.

News Corp’s operations are divided into six reporting segments comprising Digital Real Estate Services, Subscription Video Services, Dow Jones, Book Publishing, News Media and Other.

News Media remains the company’s largest contributor by revenue, contributing 31.1% of total earnings. Subscription Video Services, including Kayo, comprised 20.9% while Book Publishing contributed a further 18.5%.

The company’s Digital Real Estate Services line consists of News Corp’s 61.6% interest in REA Group Limited (ASX: REA). Segment revenue edged 8% lower while earnings before interest, tax, depreciation and amortisation (EBITDA) fell 9% to $345 million.

I think the News Corp share price is one to watch this morning as investors take in the latest numbers.

Free cash flow for the group fell 15.5% to US$180 million in FY20 with higher capital expenditure and lower operating cash flow weighing on the earnings figure.

Net assets fell 9.2% to US$14,261 million in FY20 as goodwill and receivables fell from FY19 levels.

COVID-19 impact

The News Corp share price has been hit hard by the coronavirus pandemic with management providing an update on COVID-19 impacts. Management noted economic volatility, uncertainty and disruption as key factors affecting its various business lines.

Some of the other COVID-19 risks highlighted by management included:

• Lower revenue and profitability as advertising revenues continue to fall
• Supply chain disruptions, particularly in printing and manufacturing
• Company efforts to manage COVID-19 impacts may not be successful, resulting in additional costs
• Adverse workforce impacts arising from the pandemic

Foolish takeaway

The News Corp share price is up 13.3% since the company’s fourth-quarter earnings release last Friday.

I think it’s worth watching the Aussie media share to see how investors react to this morning’s update.

More reading

• Why I would buy Goodman Group and these blue chip ASX shares
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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has recommended REA Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The SEEK Limited (ASX: SEK) share price could be on the move on Wednesday after the release of the job listings company’s full year results.

How did SEEK perform in FY 2020?

It has been a difficult year for SEEK due to the coronavirus pandemic and its negative impact on listing volumes.

For the 12 months ended 30 June 2020, SEEK delivered a 2.6% increase in revenue to $1,577.4 million. This growth was driven entirely by its SEEK Investments segment, which includes the China-based Zhaopin business. It posted a 15% increase in segment revenue to $947.8 million, which offset an 11% decline in AP&A revenue to $629.6 million. The AP&A segment includes the SEEK ANZ business, which recorded a 12% decline in revenue to $387.2 million in FY 2020.

SEEK’s reported earnings before interest, tax, depreciation, and amortisation (EBITDA) came in at $414.9 million, down 9% from $455 million in FY 2019. On this occasion, a 20% increase in SEEK Investments EBITDA to $151.7 million, wasn’t enough to offset a 17% decline in AP&A EBITDA to $295 million.

On the bottom line, SEEK’s reported net profit after tax (excluding significant items) was down 51% to $90.3 million. Those significant items relate to impairment charges of $198.4 million and funding related costs of $3.6 million. Including these significant items, SEEK recorded a net loss after tax of $111.7 million.

In light of this loss and current economic conditions, no final dividend was declared. Once economic conditions improve, management intends to resume the payment of dividends.

Outlook.

SEEK’s CEO and Co-Founder, Andrew Bassat, is cautious on the near term, but remains very positive on SEEK’s long term prospects.

He said: “The current macro outlook is highly uncertain. Our near-term profits will be impacted by COVID-19 but our focus is on executing and investing for the long-term. We are confident our investment and long-term focus is the right approach as SEEK’s revenue opportunity remains large and under-penetrated. If we invest and execute well, we can take advantage on improving conditions in the near-term but also a much larger longer-term revenue opportunity.”

Due to uncertain market conditions, SEEK is not providing any guidance, but has given investors an idea of what FY 2021 might look like.

This is based on a number of assumptions such as ANZ and Asia job ad volumes recovering during FY 2021 but remaining below FY 2020 peaks. It also assumes gradual improvements in online billings for the Zhaopin business in the first half, before growing in the second half.

Based on this, SEEK has suggested FY 2021 could see revenue of ~$1,470 million, EBITDA of ~$330 million, and a reported net profit after tax of ~$20 million. This represents declines of 6.8%, 20.5%, and 77.85%, respectively, on FY 2020’s result.

Mr Bassat commented: “SEEK’s short-term results will be negatively impacted by the challenges of COVID-19. Over the longterm, our strategy and overall revenue opportunity remain intact albeit COVID-19 will likely impact the timeframe to achieve our A$5b revenue aspirations. We are confident in our strategy and growth prospects, and as a result we will continue to invest across ANZ, Asia, Zhaopin, OES and ESVs.”

“When labour markets return to more normal conditions, we expect to generate a high ROI given our market leadership and track record of generating strong returns from investing in product, technology and data. The near-term will continue to pose challenges, but we will remain agile to take advantage of new growth opportunities as they arise. If we invest and execute well, we expect SEEK to emerge a stronger and better business from this challenging period,” he concluded.

More reading

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Motley Fool contributor James Mickleboro owns shares of SEEK Limited. The Motley Fool Australia has recommended SEEK Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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